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Articles 1 - 27 of 27
Full-Text Articles in Banking and Finance Law
The Future Of Ai Accountability In The Financial Markets, Gina-Gail S. Fletcher, Michelle M. Le
The Future Of Ai Accountability In The Financial Markets, Gina-Gail S. Fletcher, Michelle M. Le
Vanderbilt Journal of Entertainment & Technology Law
Consumer interaction with the financial market ranges from applying for credit cards, to financing the purchase of a home, to buying and selling securities. And with each transaction, the lender, bank, and brokerage firm are likely utilizing artificial intelligence (AI) behind the scenes to augment their operations. While AI’s ability to process data at high speeds and in large quantities makes it an important tool for financial institutions, it is imperative to be attentive to the risks and limitations that accompany its use. In the context of financial markets, AI’s lack of decision-making transparency, often called the “black box problem,” …
Recursive Collective Actions Problems: The Structure Of Procyclicality In Financial And Monetary Markets, Macroeconomies And Formally Similar Contexts, Robert C. Hockett
Recursive Collective Actions Problems: The Structure Of Procyclicality In Financial And Monetary Markets, Macroeconomies And Formally Similar Contexts, Robert C. Hockett
Cornell Law Faculty Publications
The hallmark of a collective action problem is its aggregating multiple individually rational decisions into a collectively irrational outcome. Arms races, “commons tragedies” and “prisoners’ dilemmas” are well-known, indeed well-worn examples. What seem to be less widely appreciated are two complementary propositions: first, that some collective action problems bear iterative, self-exacerbating structures that render them particularly destructive; and second, that some of the most formidable challenges faced by economies, societies, and polities are iteratively self-worsening problems of precisely this sort. Financial markets, monetary systems and macroeconomies in particular are rife with them – as are other complex systems subject to …
Credit Rating Agency Review Board: The Challenges And Implications Of Implementing The Franken-Wicker Amendment To Dodd-Frank, Christopher R. Dyess
Credit Rating Agency Review Board: The Challenges And Implications Of Implementing The Franken-Wicker Amendment To Dodd-Frank, Christopher R. Dyess
The Journal of Business, Entrepreneurship & the Law
The purpose of this paper is to analyze, critically review, and determine whether a hypothetical credit rating agency board, as suggested in the Franken-Wicker Amendment to the Dodd-Frank Act, is a viable option for combating the conflict of interest problem between credit rating agencies and issuers. Research methodology includes a careful review of various ways to structure the board and the potential unintended consequences of doing so. The Author uses original research hand-collected from video of the Credit Ratings Roundtable conducted in Washington D.C. on May 14, 2013. The Credit Ratings Roundtable brought together experts from the credit rating industry …
Private And Public Ordering In Safe Asset Markets, Anna Gelpern, Erik F. Gerding
Private And Public Ordering In Safe Asset Markets, Anna Gelpern, Erik F. Gerding
Publications
An influential literature in economics explores the phenomenon of “safe assets” – when participants across financial markets act “as if” certain debt is risk free – as well as its role in the global financial crisis and its implications for post-crisis reform.
We highlight the role of private ordering in constructing safe assets. Private ordering, including contractual devices and transaction structures, contributes to the creation of these debt contracts, to their collective treatment in financial markets as low risk investments, and to the making of deep and liquid markets in them. These contracts and transaction structures also provide a template …
Harmonizing European Union Bank Resolution: Central Clearing Of Otc Derivative Contracts Maintaining The Status Quo Of Safe Harbors, Christoph Henkel
Harmonizing European Union Bank Resolution: Central Clearing Of Otc Derivative Contracts Maintaining The Status Quo Of Safe Harbors, Christoph Henkel
Journal Articles
This Article argues that safe harbors for financial contracts should not be expanded in Europe, but instead should be repealed, as suggested by some commentators in the United States. At the very minimum, credit derivatives, swaps, and repurchasing agreements should be subject to a stay, and the resolution authorities in the Member States should have the power to assume beneficial contracts and to reject other unfavorable contracts. Also, the power of resolution authorities to transfer derivative positions in full or in part should not be sanctioned in favor of a full transfer. Rather, resolution authorities should have the power to …
Contract As Pattern Language, Erik F. Gerding
Contract As Pattern Language, Erik F. Gerding
Publications
Christopher Alexander’s architectural theory of a "pattern language" influenced the development of object-oriented computer programming. This pattern language framework also explains the design of legal contracts. Moreover, the pattern language rubric explains how legal agreements interlock to create complex transactions and how transactions interconnect to create markets. This pattern language framework helps account for evidence, including from the global financial crisis, of failures in modern contract design.
A pattern represents an encapsulated conceptual solution to a recurring design problem. Patterns save architects and designers from having to reinvent the wheel; they can use solutions that evolved over time to address …
Law In Finance, Katharina Pistor
Law In Finance, Katharina Pistor
Faculty Scholarship
Law’s relevance to finance is by now well recognized, in no small part due to the literature on "law and finance" (La Porta et al. 1998; La Porta, Lopez-de-Silanes, and Shleifer 2008) celebrated in this journal ten years ago under the heading "the new comparative economics" (Djankov et al. 2003). There will always be some debate as to whether a specific law or regulation distorts or supports markets, but few would argue today that law is irrelevant to financial markets or that they could operate entirely outside it.
This special issue takes the debate about the relation between law and …
A Legal Theory Of Finance, Katharina Pistor
A Legal Theory Of Finance, Katharina Pistor
Faculty Scholarship
This paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put them in direct tension with commitments enshrined in law or contracts. This is the case especially in times of financial crisis when the full enforcement of legal commitments would result in the self-destruction of the financial system. This law-finance paradox tends to be resolved by suspending the full force of law where the survival …
Defining Our Terms Carefully And In Context: Thoughts On Reading (And In One Case, Rereading) Three Books, Cynthia C. Lichtenstein
Defining Our Terms Carefully And In Context: Thoughts On Reading (And In One Case, Rereading) Three Books, Cynthia C. Lichtenstein
Cynthia C. Lichtenstein
In preparing to write this paper, I read again Walter Bagehot’s Lombard Street: A Description of the Money Market , Perry Mehrling’s The New Lombard Street: How the Fed Became the Dealer of Last Resort and John Authers’ The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How to Prevent Them in the Future. . Bagehot, of course, was the Governor of the Bank of England when he wrote what Mehrling calls his “magisterial” treatise in 1873 on how a central bank must react to a financial crisis. Mehrling is an economist and an economic historian. Authers is a …
Complexity, Innovation, And The Regulation Of Modern Financial Markets, Dan Awrey
Complexity, Innovation, And The Regulation Of Modern Financial Markets, Dan Awrey
Cornell Law Faculty Publications
The intellectual origins of the global financial crisis (GFC) can be traced back to blind spots emanating from within conventional financial theory. These blind spots are distorted reflections of the perfect market assumptions underpinning the canonical theories of financial economics: modern portfolio theory, the Modigliani and Miller capital structure irrelevancy principle, the capital asset pricing model and, perhaps most importantly, the efficient market hypothesis. In the decades leading up to the GFC, these assumptions were transformed from empirically (con)testable propositions into the central articles of faith of the ideology of modern finance: the foundations of a widely held belief in …
On The Theoretical Foundations For Regulating Financial Markets, Katharina Pistor
On The Theoretical Foundations For Regulating Financial Markets, Katharina Pistor
Faculty Scholarship
How we think about financial markets determines how we regulate them. Since the 1970s modern finance theory has shaped how we think about and regulate financial markets. It is based on the notion that markets are or can be made (more) efficient. Financial markets have been deregulated when they were thought to achieve efficient outcomes on their own; and regulation was designed to lend crutches to them when it appeared that they needed support. While modern finance theory has suffered some setbacks in the aftermath of the global crisis, defenders hold that improving market efficiency should still be the overriding …
Governing Interdependent Financial Systems: Lessons From The Vienna Initiative, Katharina Pistor
Governing Interdependent Financial Systems: Lessons From The Vienna Initiative, Katharina Pistor
Faculty Scholarship
Financial markets have become globally interdependent, yet their governance has remained national at the core. This friction encumbers crisis management and distorts incentives for crisis prevention. The Vienna Initiative, formed to manage the fallout from the global crisis in the countries of Central and Eastern Europe (CEE), offers an alternative coordinated, multi-stakeholder governance framework. A critical prerequisite for such a regime is a coordinating agent, or ‘anchor tenant’, that is deeply vested in the stability of transnational financial systems, but does not directly compete with market actors or regulators. Lessons for more effective governance of financial interdependence are discussed.
Bubbles, Busts, And Blame, Robert C. Hockett
Bubbles, Busts, And Blame, Robert C. Hockett
Cornell Law Faculty Publications
I argue that financial asset price bubbles and busts, such as those we have recently experienced in the mortgage and securities markets, are compatible with market efficiency, individual rationality, and even ethically unobjectionable behavior. The reason is that they constitute classic recursively self-amplifying collective action problems, the hallmark of which is the efficient aggregation of individually rational behaviors into collectively calamitous outcomes. In the present case, individuals rationally "legged the spread" between cheap borrowing costs and credit-fueled capital gains rates, neither of which market actors could affect in their individual capacities even when knowing that credit would have eventually to …
Things Fall Apart: Regulating The Credit Default Swap Commons, Kristen N. Johnson
Things Fall Apart: Regulating The Credit Default Swap Commons, Kristen N. Johnson
University of Colorado Law Review
Financial markets are an important national and international infrastructure resource that reflect attributes similar to the those that characterize commons, as described in property law literature. Through a case study examining the credit default swap market, this Article illustrates the analogy between financial markets and a traditional commons. After exploring the attributes of a commons, this Article examines the costs and benefits of the credit default swap market. Similar to a traditional commons, tragedy in financial markets occurs when market participants capture benefits while imposing the costs or negative externalities from their activities on other members of society. Commons scholars' …
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Michigan Law Review
Chrysler entered and exited bankruptcy in forty-two days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo-sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the …
The Confidence Game: Manipulation Of The Markets By Governmental Authorities, Caroline Bradley
The Confidence Game: Manipulation Of The Markets By Governmental Authorities, Caroline Bradley
Articles
No abstract provided.
How Should The Financial Markets Be Regulated?, Tamar Frankel
How Should The Financial Markets Be Regulated?, Tamar Frankel
Faculty Scholarship
The financial markets should be regulated mostly by examinations, not by prosecution. And examinations should be far more intense when prices rise, not after a crash.
The Subprime Mortgage Crisis: Will It Change Foreign Investment In Us Markets?, Lindsay Joyner
The Subprime Mortgage Crisis: Will It Change Foreign Investment In Us Markets?, Lindsay Joyner
South Carolina Journal of International Law and Business
No abstract provided.
States, Markets, And Gatekeepers: Public-Private Regulatory Regimes In An Era Of Economic Globalization, Christopher M. Bruner
States, Markets, And Gatekeepers: Public-Private Regulatory Regimes In An Era Of Economic Globalization, Christopher M. Bruner
Michigan Journal of International Law
This Article illuminates the spectrum of international economic regimes through discussion of an under-theorized regulatory structure in which traditional distinctions between State and market, public and private power, hard and soft law, and international and domestic policy realms, essentially collapse-the "public-private gatekeeper."
Geo-Politics, The ‘War On Terror’ And The Competitiveness Of The City Of London, Richard Woodward
Geo-Politics, The ‘War On Terror’ And The Competitiveness Of The City Of London, Richard Woodward
Books/Book Chapters
No abstract provided.
Governing The City Of London In A Global Era: The Promise And Problems Of Transgovernmental Regulatory Networks, Richard Woodward
Governing The City Of London In A Global Era: The Promise And Problems Of Transgovernmental Regulatory Networks, Richard Woodward
Books/Book Chapters
No abstract provided.
Going-Private Decisions And The Sarbanes-Oxley Act Of 2002: A Cross-Country Analysis, Ehud Kamar, Pinar Karaca-Mandic, Eric L. Talley
Going-Private Decisions And The Sarbanes-Oxley Act Of 2002: A Cross-Country Analysis, Ehud Kamar, Pinar Karaca-Mandic, Eric L. Talley
Faculty Scholarship
This article investigates whether the passage and the implementation of the Sarbanes-Oxley Act of 2002 (SOX) drove firms out of the public capital market. To control for other factors affecting exit decisions, we examine the post-SOX change in the propensity of public American targets to be bought by private acquirers rather than public ones with the corresponding change for foreign targets, which were outside the purview of SOX. Our findings are consistent with the hypothesis that SOX induced small firms to exit the public capital market during the year following its enactment. In contrast, SOX appears to have had little …
Glass-Steagall: The American Nightmare That Became The Israeli Dream, Ehud Ofer
Glass-Steagall: The American Nightmare That Became The Israeli Dream, Ehud Ofer
Fordham Journal of Corporate & Financial Law
No abstract provided.
Stability In World Financial Markets: Introductory Remarks, Alan Rechtschaffen
Stability In World Financial Markets: Introductory Remarks, Alan Rechtschaffen
Fordham Journal of Corporate & Financial Law
No abstract provided.
Banking Supervision And Government Policy: Intermediation In Today's Financial Markets, Dr. John Kambhu
Banking Supervision And Government Policy: Intermediation In Today's Financial Markets, Dr. John Kambhu
Fordham Journal of Corporate & Financial Law
No abstract provided.
Asset Securitization And Corporate Risk Allocation, Christopher W. Frost
Asset Securitization And Corporate Risk Allocation, Christopher W. Frost
Law Faculty Scholarly Articles
Asset securitization is a financial innovation in which corporations sell financial assets to a specially formed entity that in turn taps financial markets for the purchase price. The device provides firms an alternative to raising capital through traditional debt and equity markets. Practitioners of the approach tout securitization as a means through which a firm can lower its overall cost of capital by limiting the risk facing investors in the securitized assets. Commentators have described asset securitization as "one of the most important financing vehicles in the United States." Interest in the device is increasing dramatically as more companies see …
What Can Be Done About Stock Market Volatility, Tamar Frankel
What Can Be Done About Stock Market Volatility, Tamar Frankel
Faculty Scholarship
Volatility is as old as the financial markets. The bull market of 1986 and the crash that followed in 1987 were but the latest of periodic market gyrations that started with the South Sea Bubble and the Lombard Street run on commercial paper and have continued ever since.' Volatility in the financial markets would not be very important if market activity simply mirrored economic activity. Volatility would be much less important if the markets moved independently of the economy. But if we believe, as I do, that the markets and the economy are interdependent, and that their volatility is generally …